Essar Power takes debt route for expansion

MUMBAI: Essar Power, part of the Ruia family-controlled conglomerate, has firmed up plans to invest Rs 20,000 crore to scale up its power generation capacity by 4,800 mw to 6,000 mw in three years to cater to the growing demand for electricity in the country.

The company is in the process of raising Rs 15,000 crore in debt for financing four power projects ��� three thermal plants and a co-generation plant ��� that the group will build by 2012, Essar group director Anshuman Ruia told ET.

���We are in advanced stage of raising debt from the public and private lenders, including State Bank of India and Power Finance Corporation,��� he added. The promoters, the Ruia family, will chip in Rs 5,000 crore as the equity contribution to the expansion plan, which will have a debt-equity ratio of 3:1.

Currently, Essar Power has 1,200 mw and has been working on the four projects since the past two years, negotiating with Chinese, European and US equipment suppliers and recruiting people for the projects.

The move to build 4,800 mw of power capacity would require recruitment of about 1,000 skilled personnel. This alone would boost the total number of people employed by the Essar group to more than the current 20,000, minus those working in the group���s ITES units.

The four power projects are coming up in Gujarat, Madhya Pradesh and Jharkhand and will enjoy captive coal linkages where the group owns mines and source imported coal at projects closer to the ports.

Mr Ruia said the group has tied up boiler-turbine-generator with China���s Harbin and Siemens and has also finalised the EPC contracts. Initially, the debt-equity proportion will be 75:25, which will be later improved to 70:30, Mr Ruia added.

The power sector is the next biggest growth sector after telecom in India and the Essar group plans to leverage the opportunity by operating large power plants. It has a blueprint to own 10,000 mw of power capacity. ���Construction work at various sites is under progress and by 2011, we���ll be operating around 5,000 mw,��� said Mr Ruia.

India has a power deficit of around 25,000 mw, and to meet this gap the country has planned to add around 78,000 mw to its combined generation capacity by 2012. India���s largest power utility, NTPC, with an installed capacity of 30,644 mw, has outlined a plan to increase capacity by 22,400 mw. Private players such as Tata Power (with installed capacity of around 2,500 mw), Reliance Power, Adani Power and JSW Energy have proposed power projects to feed the growing demand.

The projects include 1,200 mw pithead coal-fired Mahan thermal power plant at Sidhi in MP, a 1,200 mw imported coal-based and a 900 mw gas and liquid fuel power plant at Jamnagar in Gujarat and another 1,200 mw pithead coal-based power plant at Tori in Jharkhand.

The group will also add 200 mw of wind energy during the same period, as per government norms which stipulate that companies setting up conventional power units should also contribute toward building renewable plants. About 100 mw of wind energy is under construction in Gujarat and for another 100 mw, the company is acquiring land in Tamil Nadu.

Essar has already signed power purchase agreements with the respective state electricity authorities and has received most clearances except for a few, said Mr Ruia.

���To reduce dependency on third-party fuel, the company has finalised fuel linkages for all plants, including overseas linkages for imported coal, from Indonesia and Mozambique mines. In India, it has been awarded two captive coal mines at Chakla and Ashok Karkata in Jharkhand. This will reduce risks,��� Mr Ruia added.